How the City is repaid for Sundance remodel

Last week’s story noted that when Sundance Cinemas negotiated its lease with Cordish Cos. for its theater at Bayou Place, the city agreed to pitch in on the remodel of the theater.

Sundance plans to remodel the 36,000 square foot theater space at the cost of about $2.3 million, and the Downtown Redevelopment Authority will reimburse up to $750,000 of it. Cordish also plans to pay a third of the costs.

The Downtown Redevelopment Authority operates the tax increment reinvestment zone that encompasses 60 downtown city blocks. In such zones, some of the property taxes collected from property owners in the area are set aside for reinvestment in the zone.

The authority doesn’t pay the reimbursements if the theater doesn’t open by Nov.1.

Sundance is paying a base rent as well as a percentage rent to Cordish. Percentage rent is a payment based on annual sales.

According to agreement between the Downtown Redevelopment Authority and Cordish posted below, a repayment to the authority is triggered when Sundance posts annual revenues of $3.5 million. At that point, Sundance would pay the authority 10 percent of its percentage rent. If annual sales hit $5 million, Sundance would pay more.

Payments to the start after the first year of operation, a spokeswoman for the city said.

“This is an incentive for them to do well and a way for the authority to benefit from the success of the project,” said Clark Lord, an attorney who represented the Downtown Redevelopment Authority.

The agreement also notes that Sundance starts paying rent, of at least $500,000, during the second year of the lease. The authority encouraged the first year to be rent-free, so Sundance could put up its share of the remodel costs, said developer Ed Wulfe, who participated in the negotiations on behalf of the city.

Also, similar to the terms the prior theater in the space, Angelika, had, the theater can use the city-owned garage for free.

Among the improvements to be reimbursed include painting, carpet and flooring, tile, movie screens, seats, countertops, plumbing, heating, electrical, fire system and code upgrades.

The City of Houston, which owns the building, rents it to Cordish for $50,000 a year, a deal struck years ago when Cordish agreed to redevelop, rent and manage the property. Cordish has a 55-year lease on Bayou Place.

According to its lease, Cordish is also to pay 25 percent of gross revenues after deductions, which include Cordish’s capital costs. Since those costs haven’t been covered yet, there has only been one year in which a small payment of the extra 25 percent has been made, a city spokeswoman said.

The low rent was an incentive because the city anticipated that Bayou Place would generate more revenue for the city’s underground parking garages.

Bill says: Y’know, it’d make far more money for the city as a parking lot.

Its good thing your not in control. Thats what Houston needs another parking lot. I’m glad the city found a tenant that is well known that can help make DT a better place to visit instead of another parking lot.